DTI proposing changes TRABAHO bill

MANILA, Philippines — The Department of Trade and Industry (DTI) is proposing changes to the Tax Reform for Attracting Better and High Quality Opportunities (TRABAHO) bill such as longer period for income tax holidays (ITH) of five years instead of three years, an option for enterprises currently enjoying the ITH and the gross income earned (GIE) incentive to be governed by the provisions of the new code, and to remove the provision giving the sole authority to the secretary of finance to interpret provisions on tax incentives. 

The proposed changes are contained in a document showing the points being discussed by the DTI with the Department of Finance on the TRABAHO bill approved on third and final reading by the House of Representatives, which seeks to reduce the corporate income tax rate gradually to 20 percent from 30 percent, and rationalize fiscal incentives. 

Among the changes being proposed by the DTI is for firms to be allowed to enjoy ITH for a longer period of five years instead of just three years, and for other income tax based incentives to be made available for five years instead of two years. 

“This is to make our income tax based incentive competitive with other ASEAN countries, more specifically Vietnam, Malaysia, and Singapore,” the DTI said. 

Currently, registered firms in the Philippines can enjoy the ITH for four to eight years. 

In Vietnam, firms can enjoy ITH from four to eight years, with the ITH commencing after first profits or the fourth year, while in Malaysia, firms can avail of the ITH for five years which could be extended for another five years. 

As for Singapore, the ITH is available for five to 15 years, and three to 15 years in Thailand. Meanwhile, the ITH can be enjoyed for five to 20 years in Indonesia, depending on the amount of investment made. 

Apart from making the ITH available for a longer period for firms, the DTI also wants existing registered enterprises to be entitled to their ITH as provided under the Certificate of Registration, including those under the GIE regime. 

Under the TRABAHO bill, firms enjoying the five percent tax on GIE would be allowed to continue to utilize such incentive for two to five years, depending on how long they have been availing of the benefit. 

The DTI likewise wants registered enterprises to have the option to be governed by the provisions of the new code within two years from its effectivity and be eligible for the incentives. 

In addition, the DTI is pushing to keep the one stop character mechanism of ecozone and free ports in the operations of the registered enterprises by providing the local government share allocation during the corporate income tax period.

“This is to promote the ease of doing business within ecozones and freeports in the locality where the investment is located, and maintain any unnecessary intervention in the business operations of the registered business enterprises by the local government unit,” the DTI said.